Freight tax applicable in Hong Kong SAR

Taxation
Hong Kong, SAR operates a territorial basis of taxation under which only income that has a source in Hong Kong is taxable.

Profits tax for the year of assessment 2008/09 and onwards is charged at the rate of 16.5% of assessable profits. For the years of assessment 2003/04 to 2007/08 the rate was 17.5% and for 1999/2000 to 2002/03 the rate was 16%.

sums derived from the uplift of goods, livestock, mail or passengers in Hong Kong, but excluding that applicable to goods, etc. in transit or re-embarking passengers.

ii.

sums derived from towage operations which in Hong Kong waters or beginning within Hong Kong waters.

iii.

sums derived from dredging operations within Hong Kong waters.

iv.

sums from charterhire earned in respect of a ship which is operated (navigated) solely or mainly within Hong Kong waters.

v.

from charterhire earned under a charterparty for less than the whole of a ship, where the charterhire is attributable to a voyage which commences in Hong Kong.

vi.

one half of the charterhire earned by ship operating between Hong Kong waters and ports within the Pearl River Delta (i.e. Macau and ports in the Pearl River estuary).

"Total shipping Income" equals worldwide income.

The Inland Revenue may, due to difficulties in applying the above-mentioned formula, assess the assessable profits for a particular year* of assessment on the basis of a "fair" percentage. If an assessment is made on the basis of a "fair" percentage, the owner has the option at any time within two years after the end of the year of assessment, to have the profits revised to those based on the formula method.

* The tax year runs from 1 April to 31 March.

Exemption Agreements Residents of the following countries may benefit from double taxation agreements which reduce or waive the tax.

The rate of reduction shown is based on voyage earnings derived from international trade.

Country

Reduction

Date of entry
into force

Date of effect
(Year of assessment)

Comprehensive Double Taxation Agreements

Austria

100%

01/01/2011

2012/2013

Belgium

100%

07/10/2004

2004/2005

Brunei

100%

19/12/2010

2011/2012

Canada 1

100%

29/10/2013

2014/2015

China 2 (Renegotiated)

100%

08/12/2006

2007/2008

Czech Republic

100%

24/01/2012

2013/2014

France

100%

01/12/2011

2012/2013

Guernsey

100%

05/12/2013

2014/2015

Hungary

100%

23/02/2011

2012/2013

India

100%

30/11/2018

2019

Indonesia

50%

28/03/2012

2013/2014

Ireland

100%

10/02/2011

2012/2013

Italy

100%

10/08/2015

2016/2017

Japan

100%

14/08/2011

2012/2013

Jersey

100%

03/07/2013

2014/2015

Korea, Republic of

100%

08/07/2014

2017/2018

Kuwait

100%

24/07/2013

2014/2015

Liechtenstein

100%

08/07/2011

2012/2013

Luxembourg

100%

20/01/2009

2008/2009

Malaysia

100%

28/12/2012

2013/2014

Malta

100%

18/07/2012

2013/2014

Mexico

100%

07/03/2013

2014/2015

Netherlands

100%

24/10/2011

2012/2013

New Zealand

100%

09/11/2011

2012/2013

Pakistan

100%

01/07/2017

2017/2018

Portugal

100%

03/06/2012

2013/2014

Qatar

100%

05/12/2013

2014/2015

Romania

100%

18/11/2015

Income derived on or after 01/01/2017

Russia

100%

18/01/2016

2017/2018

Spain

100%

13/04/2012

2013/2014

South Africa

100%

20/10/2015

2016/2017

Switzerland

100%

15/10/2012

2013/2014

Thailand

50%

07/12/2005

2006/2007

United Arab Emirates

100%

10/12/2015

2016/2017

United Kingdom

100%

20/12/2010

2011/2012

Vietnam

100%

12/08/2009

2010/2011

Limited Treaties (Air and/or Sea):

Bangladesh

0%

09/12/2005

2005/2006

Air transportation only

Canada

0%

20/12/1996

1994/1995

Air transportation only

China 3

0%

09/01/2012

2013/2014

Air transportation only

Croatia

0%

06/08/2004

2005/2006

Air transportation only

Denmark

100%

16/12/2005

2005/2006

Sea Transport only

Denmark

0%

20/12/2002

01/01/1997

Air transportation only

Ethiopia

0%

25/05/2010

2011/2012

Air transportation only

Finland

0%

05/12/2008

2002/2003

Air transportation only

Germany

100%

17/01/2005

1988/1989

Sea Transport only

Germany

0%

12/11/1998

1998/1999

Air transportation only

Iceland

0%

18/01/2006

2007/2008

Air transportation only

Israel

0%

03/03/1999

2000/2001

Air transportation only

Jordan

0%

09/02/2006

2007/2008

Air transportation only

Kenya

0%

28/04/2006

2007/2008

Air transportation only

Korea, Republic of

0%

09/07/1996

1996/1997

Air transportation only

Kuwait

0%

10/07/2006

2007/2008

Air transportation only

Mauritius

0%

03/07/1998

03/07/1998

Air transportation only

Mexico

0%

03/12/2008

2009/2010

Air transportation only

Netherlands

100%

17/10/2001

1998/1999

Sea Transport only

Netherlands

0%

26/05/1997

1996/1997

Air transportation only

New Zealand

0%

12/11/1996

1996/1997

Air transportation only

Norway

100%

11/01/2005

2005/2006

Sea Transport only

Norway

0%

23/08/2001

01/01/1997

Air transportation only

Russia

0%

01/06/2010

2011/2012

Air transportation only

Singapore

100%

30/12/2004

2005/2006

Air & Sea transport

Sri Lanka

100%

30/03/2005

2006/2007

Air & Sea transport

Sweden

0%

20/12/2003

01/01/1997

Air transportation only

Switzerland

0%

26/03/2007

2007/2008

Air transportation only

United Kingdom

100%

03/05/2001

2002/2003

Sea Transport only

United Kingdom

0%

02/11/1998

1998/1999

Air transportation only

United States

100%

16/08/1989

1987/1988

Sea Transport only

Comprehensive Double Taxation Agreements signed, but not ratified

Belarus

100%

Signed

16/01/2017

Latvia

100%

Signed

13/04/2016

Saudi Arabia

100%

Signed

24/08/2017

Limited Treaties signed, but not ratified

Estonia

0%

Signed

30/04/2001

Air transportation only

Fiji

0%

Signed

03/12/2009

Air transportation only

Laos

0%

Signed

09/09/2009

Air transportation only

Maldives

0%

Signed

10/11/2009

Air transportation only

Seychelles

0%

Signed

24/06/2013

Air transportation only

Reciprocal exemption under Section 23B(4A) 4

Chile

01/12/2010

Korea, Republic of

1998/1999

New Zealand

1998/1999

Notes:

1.

The treaty provides that "... profits derived by an enterprise of a Party from the carriage by a ship or aircraft of passengers or goods taken on board at a place in the other Party for discharge at another place in that other Party may be taxed in that other Party, unless all or substantially all of the passengers or goods were taken on board at a place outside that other Party"

2.

Treaty excludes Macao SAR and the province of Taiwan.

3.

Only applies to Macao SAR.

4.

Chapter 12, Section 23B(4A) of the Inland Revenue Ordinance.

"For the purposes of this section, where a person who is deemed to be carrying on a business as an owner of ships in Hong Kong under subsection (2) is resident in any territory outside Hong Kong, he shall be regarded as having a reciprocity status, if the Commissioner is satisfied that any profits earned by or accrued to a person to whom subsection (1) applies from a business carried on in the territory as an owner of ships are, under the laws of that territory, exempt from a tax which is of substantially the same nature as the tax chargeable under this Part. "

5.

Owners of Hong Kong, China registered ships are exempted from profits tax on international incomes derived from the operation of their ships.

"Where the Commissioner is satisfied that the call at any location within the waters of Hong Kong of any ship owned by a person to whom subsection (2) applies is of a casual natural, and that further calls at any location within those waters by that or any other ship in the same ownership are improbable, he may in his discretion direct that that person shall be deemed not to be carrying on a business as an owner of ships in Hong Kong under subsection (2) by reason of the casual call of that ship and accordingly, in the event of his making such a direction, that person shall be so deemed not to be carrying on that business."

The Asian gypsy moth (AGM) flight season is just around the corner. BIMCO advises its members to pay attention to the possible consequences of calling at ports where the AGM is indigenous or established.